WASHINGTON (MarketWatch) — Hoping to halt a market meltdown and prevent a recession, the Federal Reserve lowered its overnight lending rate by three quarters of a percentage point to 3.50% on Tuesday in a rare move between formal meetings.The 75 basis-point surprise cut came after global financial markets sold off in dramatic fashion on Monday on fears that bad bets in credit markets could spread further and drive the U.S. economy into recession.“The committee took this action in view of a weakening economic outlook and increasing downside risks to growth,” the Federal Open Market Committee said in a statement. (See Federal Reserve press release for full statement)The Fed also lowered its discount rate by 75 basis points to 4%.
Here is a chart showing the historical trend of the Federal Fund Rate from 1957 to today.
If you are interested in federal fund rate volatility and it’s effect on the economy, the Federal Reserve Bank of New York published a paper in July 2005 that discusses it in somewhat painful detail.
Dan Green explains why this drop in the Fed Fund Rate won’t have much impact on mortgage rates.
[tags]rate cut, fed rate chart[/tags]
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I don’t know about this move. We’ve been lowering the rates for months and it doesn’t seem to be helping; hopefully this will since it’s already done! I’m a little worried about inflation and that the government isn’t addressing the right problem. Most homeowners facing foreclosure are upset down in their current home so they can’t refinance and take advantage of these rate cuts. I’d like to see something more that will help everyone and not just hopefully help the stock market. I do like that they’re trying things and not just thinking about trying things.
Where did that spike from ‘78-’81 come from?
Diddler asks: “Where did that spike from ‘78-’81 come from?”
Jimmy Carter’s failed fed policy? The “worst recession since the Great Depression”? A battle against inflation? (IMHO, a combination of the three)
Here is an interesting article on interest rates in the early 80s:
http://www.econedlink.org/lessons/index.cfm?lesson=EM36
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